Observers have said that trade within the East African Community has improved tremendously as the regional integration within the bloc has spurred the movement of goods and services across the borders.

Speaking to The Observer recently, Isaac Shinyekwa, a trade and integration research fellow at the Economic Policy Research Centre (EPRC), said trade in the region had shot up.

In a recent study, where he looked at whether the integration had created or diverted trade, Shinyekwa found that trade between Uganda, Kenya, Tanzania, Burundi, and Rwanda, had more than doubled from $1.8bn in 2005 to $4.9bn in 2011.

“Kenya overall contributed to an average share of over 40 per cent of total intra-EAC trade and enjoyed a trade surplus with its EAC partners during the period,” the study, titled Trade Creation and Diversion Effects of the East African Community Regional Trade Agreements, noted.

The study assessed trade flows in the region between 2005 and 2011. Kenya is the largest contributor to intra-EAC exports while Uganda is the largest regional importer with 37 per cent of intra-EAC imports, according to the study. Kenya recorded 57.2 per cent of the total exports in the same period.

Trade was majorly driven by a reduction in tariffs and non-tariff barriers (NTBs).

“Even when we see Uganda being like the market for Kenya, and Kenya being the powerhouse with trade volumes higher than ours, it is still a plus,” Shinyekwa said.

“We [Uganda] also export to DRC and South Sudan, whose manufacturing capacity is still lower than ours.”

In November, the EAC secretariat showed that trade among the partner states had continued to grow tremendously, shooting up by an impressive 22 per cent in 2012. The secretariat said trade grew to $5.5bn in 2012 from $4.5bn recorded in 2011 despite the huge impediments caused by non tariff barriers. Major goods traded included cooking oil, maize, and cement.

These trade figures don’t take into account informal trade, which has a significant addition to trade among the partner states. For instance, a 2012 survey by Bank of Uganda (BOU) and Uganda Bureau of Statistics (Ubos) showed that informal trade contributed significantly to the overall trade volume in the region.

The survey noted Uganda had informal exports worth $453.7m (Shs 1.1tn). While Uganda traded more with DRC and South Sudan, a bigger chunk of this money was earned from Kenya, Tanzania, and Rwanda. Godfrey Ssali, a policy analyst at Uganda Manufacturers Association (UMA), said there were international firms that only had stations in Kenya but were now considering setting up agents in other partner states because of the integration.

“There is real trade and investment happening, thanks to the integration,” Ssali said.
“We only need to make it [EAC] better.”

Shem Bageine, Uganda’s minister for East African Affairs, told journalists recently that partner states were reviewing their local laws and policies to realign them with the integration requirements. He said: “There are taxes not supposed to be charged on a partner state but many businesses are being forced to pay. There has been a little bit of slowness in harmonizing some laws, but we will reach there.”

In 2016, the partner states are expected to have fully implemented the common market protocol, where there is free movement of goods, labour, services and capital, and the right of establishment and residence in the region. The region is expected to have a common currency in 10 years.

Opportunities
According to Shinyekwa, there are opportunities that partner states must seize, especially in the extractives sector. Uganda and Kenya have discovered oil while Tanzania has gas. He said the partner states could use such resources to develop the critical infrastructure to attract more investment in the region.

“We really welcome the Standard Gauge Railway (SGR) idea. If it’s finished, the trade costs will reduce drastically. Just picture this – a small trader somewhere in Uganda will just put their banana on the train and sell it in Mombasa,” Shinyekwa said.

“If you are importing a car, you only need someone to load it on the train and it finds you in Kampala.”

By October, Uganda, Rwanda, and Kenya are expected to have contracted firms to construct the SGR. Kenya appears to be ahead of the rest as it recently signed a pact with China’s Exim bank to fund the project stretching from Mombasa to Kigali. To consolidate the gains, some analysts say, there is a need to create equal investment opportunities in the region.

Kassim Omar, the chairman of the Uganda Freight Forwarders Association, said Kenya and Tanzania were still not open enough for investors from within the region.

“Kenya and Tanzania still require that when you are to invest there, you get a local partner. Actually in Tanzania, they want the local partner to have over 50 per cent in the investment. This is some sort of a set-back,” Omar said at a recent workshop with journalists in Kampala.

Source: The Observer

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.